Leading hotelier Marriott International is planning to more than triple its presence in the Middle East and Africa over the next seven years. Regional boss Alex Kyriakidis explains how
Alex Kyriakidis has some pretty ambitious plans. Marriott International’s man in the region may already be overseeing some 20,000 rooms in the Middle East and Africa, but he’s planning to more than triple those numbers to 70,000 in the next seven years.
Are those plans realistic? Kyriakidis certainly seems to think so. His strategy has been to separate the 70 countries he overlooks into three categories: ‘super growth’, which includes the UAE, Saudi Arabia, Egypt and Nigeria, and which will see the most investment; ‘moderate growth’, where Marriott will be investing through a programme of regular visits and conferences; and ‘lower growth’, where the firm will invest reactively, i.e. when approached by property owners in one of the 55 countries in that bracket.
Last month, Marriott International added an extra dimension to those plans by announcing a plan to buy Protea Hotels, a South African family of three brands that operates or franchises 116 hotels in seven African nations. At one fell swoop, Marriott will jump from being the eighth-largest operator on the continent, in terms of the number of rooms it runs, to the largest.
It will now have 80 hotels in South Africa, a fast-developing market, up from precisely none before the deal was announced. Another 16,000 people have been added to its payroll in sub-Saharan Africa. Kyriakidis sees the deal as a game-changer, especially in light of research that projects Africa’s population will double to 2 billion people by 2050, and the tripling of the continent’s middle class to 1 billion people over the same period.
And, in line with better transport connections and more foreign direct investment from the Gulf into Africa, he’s also making a clear pitch for some of that regional wealth to be allocated to the hospitality sector too.
“There are lots of [Gulf] sovereign wealth funds that want to get into the hotel business in Africa, but until now the question was, is there a trusted name I could work with?” Kyriakidis says. “Well, now we’ll be able to give those investors a real platform.”
Marriott already has experience in dealing with the Abu Dhabi Investment Authority (ADIA), the world’s third-biggest sovereign wealth fund with $627bn of assets under management, according to the SWF Institute. Last year, ADIA bought 42 Marriott hotels controlled by the UK’s Royal Bank of Scotland, as well as purchasing three Edition-branded hotels in London, New York and Miami for $800m.
Kyriakidis is also refusing to rule out the prospect of any further acquisitions, though he won’t specify where.
“The analyst community was very positive on the Protea acquisition as being highly strategic, value generative and exactly the right thing to do at this point in time of Africa’s growth trajectory,” he says. “Does that mean it’s the end and we pack up shop? The short answer is absolutely not. We are very committed to growth and will look at any or all opportunities in the future, whether organic or acquisition.”
But it seems that most of the growth will come organically. Marriott’s plans for the UAE market are extensive; it has 2,700 rooms in the country right now, and will push that up to 5,500 rooms by the end of 2015. By 2020, Kyriakidis thinks he can get that figure to around the 10,000 mark.
Much of that expansion will take place in Dubai, a city that now lies third globally in terms of revenue per available room (RevPAR, a key industry metric) at $185, placing it just behind New York and Paris. Barely a month seems to go past without a new glitzy hotel opening up in the UAE’s commercial capital, but Kyriakidis says he has no concerns about Dubai’s capacity to suck up new supply.
“I look back to my files in 2007 — the year before the global crash — and at that time in Dubai there were 34,000 rooms,” he says. “Today there are 60,000 and another 20,000 in the pipeline. What’s extraordinary is that Dubai has been able to absorb the global crisis and the growth in rooms, and still have 79 percent occupancy in the year to date today.”
The Marriott executive points towards recent investment infrastructure by the government in the travel and tourism industry, especially with regard to new hotels and the full launch of Al Maktoum International, the emirate’s second airport, in October.
“Another key fundamental is the focus on expanding the market beyond business and couple leisure into family,” he adds. “Family is clearly the sector that is being focused on when making these kind of announcements — the theme parks that are being built, the kind of investment that Abu Dhabi is making in culture tourism and so on.”
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